Mumbai: Cut in repo rate may reduce interest on your home loans

Homebuyers have reason to cheer as the RBI cut repo rates by 25 basis points. This move may cause a reduction in interest rates on home loans and lower EMIs as well as more funds available to the builders.

Homebuyers have reason to cheer as the Reserve Bank of India (RBI), in a surprising move, cut repo rates by 25 basis points. This move may cause a reduction in interest rates on home loans and lower EMIs as well as more funds available to the builders.

Repo rate is the interest that banks pay when they borrow money from the RBI to meet their short-term fund requirements. On Thursday, RBI reduced the Repo Rates to 7.75 % from 8 % and many expect a further fall in the coming months.

And real estate experts said the move is likely to have a positive impact on the realty sector, which has been facing a slowdown in recent times. Anshuman Magazine, chairman & MD, CBRE South Asia Pvt Ltd, a leading realty research firm said, “Given the current market situation, this reduction in the base rate is an important step in improving home buyers sentiments.”

Builders have also welcomed the move, but want the RBI to do more on this front. “This will induce banks to offer home loans at less than 10% after the gap of four years. It will also act as a confidence building move,” said Nayan Shah, CEO and managing director, Mayfair Group.

Others expected more such cuts in future. “At a time when property prices and raw material costs has been rising sharply, the decision to reduce interest rates comes as a great respite for thousands of home buyers and other stakeholders of real estate,” said Mayur Shah, managing director, Marathon Group.

In the last few years, the RBI had imposed stringent lending conditions, such as allowing only 80% loan disbursal for home loans. In addition, there has been constant hike in interest rates — factors that forced many home buyers to postpone their purchase plans.